| Bollinger bands are one of the most effective | | | | volatile prices are and how far away price is |
| technical indicators you can use and should | | | | from "normal" value. |
| be looked at by all traders. | | | | |
| | | | Most volatile price movements are short term |
| Bollinger bands are simple to understand | | | | and are caused as much by trader psychology |
| simple to apply and best of all they can | | | | and the influence of greed and fear. |
| really enhance your profit potential, so | | | | |
| let's look at them. | | | | Trading with this in mind Bollinger bands are |
| | | | a very useful in the following scenarios. |
| Bollinger bands will show you how to do the | | | | |
| following. | | | | 1. Spotting New Trend Trends |
| | | | |
| Predict big trending moves | | | | When a market makes trades in a narrow range, |
| | | | the Bollinger bands be narrow and close to |
| Spot trend reversals | | | | the central moving average this indicates a |
| | | | market with low volatility. |
| Time trading positions with greater accuracy. | | | | |
| | | | This can be a warning that a high volatility |
| They are a visual indicator so you may like | | | | trending move is about to start. |
| to profit this out and look at some of the | | | | |
| free chart services on the net so you can get | | | | When prices break above or below the upper or |
| a better all round view on the power of | | | | lower band, a trend could be about to |
| Bollinger bands and their potential. | | | | develop. |
| | | | |
| What are Bollinger Bands? | | | | Traders will then take a position in the |
| | | | direction of the trend. |
| Bollinger bands are volatility bands drawn | | | | |
| around a simple moving average in the centre | | | | 2. Timing Entry Levels For Multiple Positions |
| giving you three lines to look at. | | | | |
| | | | We all hat missing the original trend however |
| Bollinger bands are calculated using the | | | | Bollinger bands can help you get in the trend |
| standard deviation of price over the same | | | | with good risk to reward on a pullback. |
| period as moving averages and plotted as | | | | |
| lines above and below the moving average. | | | | Simply look for dips toward the centre band |
| | | | and enter in the direction of the trend. |
| Moving averages are used to identify the | | | | |
| underlying trend. | | | | 3. Market Turning points |
| | | | |
| Bollinger bands combine this moving average | | | | When the price touch the top of the Bollinger |
| with the volatility of the individual market | | | | band and stall a return to the middle band is |
| known as standard deviation of price to | | | | likely and a sell is generated. |
| create a trading envelope. | | | | |
| | | | If the price touches the bottom of the |
| The distance between upper and lower | | | | Bollinger band and momentum does not follow |
| Bollinger bands shows the volatility of the | | | | through you do the reverse and buy. |
| market. The further away the upper and lower | | | | |
| bands are the more volatile price is. | | | | Bollinger bands are a great indicator but |
| | | | like all technical indicators they don't work |
| Why Bollinger Bands Work | | | | all the time by themselves and you need to |
| | | | incorporate other indicators as filters. |
| In any market, the value of the instrument | | | | |
| traded tends to rise slowly over the longer | | | | To get a better picture and to weed out false |
| term. | | | | signals use basic chart analysis with |
| | | | momentum indicators such as stochastics, RSI |
| Prices may become volatile in the short term, | | | | or ADX. |
| but will normally come back to the longer | | | | |
| term moving average (the centre band) | | | | Bollinger bands are excellent as they reflect |
| | | | areas of value for timing trade entries and |
| The centre band represents "normal" value. | | | | also warn of trending moves and are an |
| | | | indicator any trader should consider to help |
| The volatility of the outer bands shows how | | | | boost their profit potential. |